20 Mar Should I use a Roth 401(k)?

Q. My employer just added a new Roth option this year. I have always saved enough to get the max match, but I also save in a Roth IRA. How can I decide which option for my 401(k) makes sense if I continue to also save in the Roth IRA?
— Saver

A. It’s terrific that your employer is giving you this new option.

The answer to your question is different for every taxpayer, so this is a conversation you need to have with your taxpayer.

But you should still understand how the choices work.

With your current set-up of having a traditional 401(k) and Roth IRA, traditional 401(k) contributions reduce your taxable income now while the Roth IRA contributions, made with after-tax dollars, will grow tax-free, said Victoria Cannillo, an associate financial planner with Baron Financial Group in Fair Lawn.

Now the Roth 401(k) contributions are also made with after-tax dollars, just like a Roth IRA.

“Unlike traditional 401(k) contributions, Roth 401(k) contributions do not reduce your taxable income,” she said. “Therefore, depending on your income, contributing to a Roth 401(k) could potentially move your income higher than what it is now.”

She also noted that if your income exceeds the IRS income limits, you could become ineligible to contribute to a Roth IRA account.

It’s great to have money in several buckets — Roth and traditional — so you have options in retirement when you need to take withdrawals. Consider meeting with a financial advisor who can examine your overall finances to see how these choices will work best for you.

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This story was originally published in March 2026. 

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.